SPECIAL ASSISTANCE SCHEME

GS2 GOVERNANCE: 

1. Overview

The Government of India has allocated funds under the Special Assistance Scheme, offering 50-year interest-free loans to states. The scheme promotes capital investment and supports state-led reforms.

2. Scheme Details

• Launched: FY 2021 with an initial allocation of ₹12,000 crore.
• Current Allocation: ₹1.3 trillion (FY24), with ₹30,000 crore tied to specific reforms.
• Purpose: Supports post-pandemic recovery and infrastructure development.

3. Fund Allocation & Distribution

• FY25 Allocation: ₹1.25 trillion.
• 97% of funds approved for disbursal.
• ₹55,000 crore (one-third) based on states’ share in central taxes.
• ₹95,000 crore contingent on states meeting reform targets.

4. Reform Requirements

• States must comply with Centrally Sponsored Schemes and ensure fund transparency.
• Key reforms include:
  • Tourism development (iconic destinations).
  • Vehicle scrappage incentives.
  • Industrial growth initiatives.

5. Top Beneficiary States

• Uttar Pradesh: ₹13,042 crore.
• Bihar: ₹12,907 crore.
• Madhya Pradesh: ₹10,635 crore.

6. Economic Impact

• GDP Growth Trends:
  • Sept Quarter: Growth slowed to 5.4% (lowest in 2 years).
  • Dec Quarter: Growth rebounded to 6.2%.
• Objective: Speedy loan approvals aim to boost state spending and economic growth.

7. Future Outlook

• The scheme will strengthen state capacities and enhance infrastructure.
• Outcome-based funding will encourage states to achieve reform goals.